The Supply Chain Matters blog highlights another published example of a global-wide manufacturer changing its direct materials supply management strategies to offset exploding global transportation and disruption costs.

 

Bloomberg reports that global wide paint and coatings producer AkzoNobel NV has elected to shift sourcing of more of the required resins needed in paint production to in-house production.

This Amsterdam based manufacturer describes itself as the most sustainable paints company globally, which has been inventing the future of coatings for more than two centuries. Active in over 150 countries, and the custodian of a host of 60 plus global branded products, this company reflects a producer managing a significant global supply network.

According to Bloomberg, the company will increase its in-house production of needed resins, used in the production of paints and resins, from a current level of 40 percent to a reported level of 55 percent by the end of 2023. A senior executive indicated to Bloomberg hat this supply management shift s expected to improve EBIT by as much as 20 million euros (upwards of $23 million)

Noted is that labor shortages and the escalating cost of transporting materials have exacerbated needs for filling customer orders, leading to a current backlog of upwards of € 100 million. The coatings producer reported € 9.6 billion in total revenues for its fiscal 2021 year, up 22 percent year-over year. Operating income was up 16 percent for the year, while the company experienced a reported € 770 million of raw material cost inflation for the latest fiscal year.

Reporting fourth-quarter financial performance last week, the producer indicated plans to raise prices for certain company products by as much as 16 percent in order to offset the high level of inbound cost increases. Resins reportedly account for a large share of the producer’s existing carbon footprint , and the ability to reduce global-wide shipping, save on logistics expenditures, and provide more direct control of the producer’s CO2 footprint led to the decision to shift more production to inhouse sourcing.

 

As noted in our Prediction Two of our specific 2022 Predictions for industry and Global Supply Chains, we anticipate that restoring more direct control of supply network sourcing will indeed be a driving force in 2022. In that light, there will be more announcements reflecting such strategies.

 

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